SWOT analysis is an analytical tool used for the identification and categorization of internal and external factors. Strengths and weaknesses in SWOT analysis are termed as internal factors while opportunities and threats are termed as external factors. SWOT analysis can be conducted for a situation, an organization, a project, a new venture, a country, a nation and even individuals. SWOT analysis definition can help organizations in their strategic planning process, and in matching their capabilities and resources to the competitive environment in which it carries out its operations.
SWOT analysis is a dynamic part of an organization’s business and management development process. It entails the collection of information pertaining to external and internal factors which may have an impact on the organization’s evolution. The SWOT analysis definition takes into consideration the weaknesses and strengths of the organization along with the threats and opportunities it faces in the external environment. Based on these factors, the company determines its future course of action, combining its strengths with imminent opportunities while trying to overcome weaknesses and combat threats.
An organization may also perform SWOT analysis for identifying whether the venture/project it is about to undertake is feasible and worth investing in or not. It is only after the project’s strengths and opportunities are outweighing the inherited weaknesses and threats that the project or venture will be undertaken and invested in.
While some factors in the SWOT analysis are internal to the venture being undertaken, others are external to it. Internal factors are ones which involve the internal operations and resources of the organization including the strengths and weaknesses inherent to the project/ venture. External factors, on the other hand, are related to the external environment and on which the organization have no influence, including opportunities and threats.
Here is an explanation of the different factors considered for the SWOT analysis:
Strengths refer to the internal characteristics which may be deemed favourable for the organization.
Weaknesses refer to the internal characteristics which may be deemed unfavourable for the organization.
Opportunities are external characteristics which the organization may use to its advantage.
Threats are external characteristics which may be potential sources of failure to the organization.
SWOT analysis definition finds applications in a variety of situations and may be applied for assessing the feasibility of the different options available as a solution to a particular problem or challenge. It can also be applied for identifying opportunities and to weigh them against imminent threats and to arrive at a final decision regarding any challenge. SWOT analysis helps organizations in determining the factors that will work in their favour and those that will work against them in achieving the desired result and objectives.
Guideline for Performing an Effective SWOT Analysis
The key to performing an effective SWOT analysis is that it clearly distinguishes where the organization is today and where it is likely to be in the future. Moreover, it is also important to be realistic about the organization’s strengths and weaknesses and to keep the outcome subjective, simple and short.